Rollout of 4G and data networks is pushing up the average selling price of smartphones as users get more aspirational and demanding.

The average selling price of smartphones in India touched $157 in the second quarter of 2017. This is an increase of $30 or 25 per cent compared to the average selling price last year, according to data provided by International Data Corporation. Smartphone price on an average was up by just 3 per cent in 2016.

Key factor

“Price sensitivity is a major factor taken into consideration by consumers while purchasing smartphones. However, with high availability of content, consumers are willing to spend extra to get the complete 4G experience,” said Alok Srivastava, Head of Business planning and intelligence and regional director of North and East from Gionee India.

Phone makers say that there is correction in pricing strategy as a number of low-cost Indian brands have found business unsustainable.

Many brands entered India with disruptive pricing that were not sustainable, now they have either increased prices after gaining their target market share or reduced operations.

Chinese handsets

An increase in the market share of Chinese handset manufacturers has also led to a surge in the average selling price of smartphones in India. “ Earlier, Indian brands with lower price points used to have a higher market share. Now the Chinese brands with phones in the middle price band have a larger share. Since the portfolio has changed from the lower price band to the middle price band, there is an upward shift in the selling price,” explains Jaipal Singh, Senior Analyst at IDC India.

Praveen Valecha, Regional Director, TCL Alcatel India, said that the Indian consumer has pushed manufacturers to provide higher memory, better camera, more battery and LCD screens . “The fact remains selling price of mobile phones is driven by a section of consumers who are willing to pay a premium for better technology,” Valecha said. Enhanced financial options and EMI schemes also allow consumers spend higher on devices as it becomes more and more indispensable.

But an increase in prices of smartphones does not directly imply increased profitability for the phone companies. “The rise in ASP does not necessarily translate into profitability largely due to specification war which pushes all brands to increase the cost of material. At the same time the higher investment on marketing for differentiation leaves narrowing the incremental profitability,” said Gionee’s Srivastava.

Affordable devices

While the average selling price may have increased, the affordable devices are not going away. Reliance Jio recently launched a 4G phone at ₹1,500 which has seen huge demand.

“There will always be a market for all segments but increasing average selling point is good news for high-end smartphone brands like Apple which have been trying to make inroads into the Indian mass market,” said a market analyst.